In the first quarter of the year, lenders became competitive and began to lower their rate offers as optimism grew for a spring cut by the Bank of England’s Monetary Policy Committee (MPC). There were many mortgage and remortgage products that were cut to below the standard base interest rate of 5.25%. As inflation failed to hit the low levels expected, it became less likely the MPC would be cutting the rate in spring, and forecasts were postponed till summer and possibly August. The lowest rates began to be pulled and replaced with higher offers. 

Rates began climbing and there was a boost in borrowing as home buyers and homeowners sought to grab the opportunity available of an unexpected lower rate. They have slowly increased over the last few weeks. Now, there is a forecast of a sooner than expected rate cut if inflation declines and the next report will be released this week on the 22nd.

Already, three big UK banks, Barclays Bank, HSBC, and TSB have cut their fixed rate mortgages. 

One offer, by Barclays Bank, are reductions of their five-year fixed rate deals for both home buyers with a 40% deposit and homeowners remortgaging. Their cuts are from 4.47% to 4.34%. TSB has announced a 0.1% cut on two-year and five-year deals. HSBC will cut their two-year and five-year loans but will pull the 10-year fixed rate deal to remortgaging homeowners.

The best low interest rate offers will not be on the market for all. Lower loan to value (LTV) ratios will bring the lowest interest rate offers. Those with large deposits will be offered the lower interest rate deals. However, there are still incredibly attractive deals for all borrowers considering there are declines despite the base rate has remained unchanged since last September.

Inflation reached double digits and had been on the rise since 2021. It has declined but is still above the Bank’s target rate of 2.0%. Along with the impact of inflation, households are dealing with higher interest rates. The news that inflation has fallen closer to target and a base rate cut is on the horizon will bring relief to many.

According to the recent data from Moneyfacts, the average two-year fixed rate mortgage is 5.92% and the average five-year fixed rate deal is 5.49%. These are above the lowest deals offered by some lenders, but again the lowest interest rate deals are reserved for borrowers putting less risk on lenders. However, the lowest rates often come with the highest cost fees. 

Borrowers are encouraged to not be so focused on deals with the lowest rates that they overlook perhaps the best deal for their needs. A slightly higher rate could have such lower fees that the overall savings are better than the deal with the lowest rate and more costly fees.

Homeowners could quickly determine what deals are available in remortgaging by shopping for a deal online. It is quick and easy to gather quotes to review and compare by visiting the website of a broker or going from one lender website to another. Brokers are easy to gather quotes from as they could offer many quotes from a variety of lenders. They might also offer exclusive deals. 

Shopping now could offer competitive deals brought from lenders ahead of a possible rate cut in June rather than later in August.

There are two inflation reports to be released before the next MPC meeting in June. The first is this week, and the next is the 19 June. If inflation declines to a level closer to target, the MPC could provide the first cut of the year on 20 June.